Four Things to Consider Whether the Home Improvement Boom is Ending

Home improvement stores have done very well over the past few years due to a home improvement boom. The four things to consider whether this boom is ending are number of sales of previously owned homes, amount of home price appreciation/home equity, age of housing and disposable income.

1. Sales of previously owned homes are down about 24% nationally from a year ago. That impacts home improvement trends because buyers and sellers tend to make more home improvements than the average household. Seller’s improve their homes in hopes of higher offers and smoother closings with fewer repair contingencies. Buyer’s improve their homes to make them better match their preferences. Fewer home buyers and sellers means fewer home improvements.

2. Appreciation started off strong this year, but most of that appreciation has been lost due to rising interest rates. However, due to high appreciation in prior years, many home owners still have significant equity in their homes. In addition, about 40% of homes nationally are owned outright. These things as a whole encourage more home improvements, but less so than in recent years past.

3. The average age of homes in the US was 40 years in 2021, compared to 29 in 2000. Older homes need more fixing and are updated or remodeled more than newer homes. That bodes well for the home improvement industry.

4. Disposable income was high following the pandemic, but has declined some since due to high inflation. The same is true of savings rates. Wages the past few years have outpaced housing costs due to low fixed mortgage rates. That continues to be the case, but that is changing as more people get higher rate mortgages. A possible recession would also reduce average disposable income.

Bottom line: The Harvard Joint Center For Housing Studies forecasts that home improvement spending will grow by 6.5% in 2023, compared to 17.8% in 2022. By comparison, the average annual rate of increase historically is 4.4% according to RubyHome.com. Things are still looking up for the home improvement industry, but the rate of increase of home improvement spending is slowing.

In another Blog, we will talk about the most popular home improvement projects. Thanks for reading!

-Jeff Jorgensen

Statistics Source: Salt Lake Realtor Magazine, November 2022

Photo Source: Unsplash